'capitalism' is a reclaimed word

Ludwig von Mises wrote,

The system of free enterprise has been dubbed capitalism in order to deprecate and to smear it. However, this term can be considered very pertinent. It refers to the most characteristic feature of the system, its main eminence, viz., the role the notion of capital plays in its conduct.

That’s from chapter 13 of Human Action.

I think Robert Murphy’s summary is even better:

Capitalism was originally a smear term for the system of free enterprise, meant to imply that this system only serves the narrow interests of the capitalists. However, the term is a good one, for the very notion of capital — of summing the market prices of the resources available for a project — is inextricably linked to monetary calculation, which itself can only occur in a capitalist society.

I was a free-market advocate before I became an advocate of capitalism. The free market is an ethical concept, not an economic one; it is merely the recognition that nonaggression needs to apply to exchange as much as it applies to anything else. (Robert Nozick summarized this idea as “capitalist acts between consenting adults.”)

Capitalism is a separate issue and a separate agenda — a positive agenda, in contradistinction to the negative agenda of nonaggression, a utilitarian concept rather than an ethical one — but the more I learned of economics, capital theory, and economic history, the less I could understand the left-libertarian position of embracing the free market while rejecting capitalism.

The free-market anticapitalists define capitalism as any system of political privilege for current capitalists, especially as it suppresses bottom-up competition, entry-level entrepreneurship, and the rights of labor. But we already have plenty of other terms to cover that ideamercantilism, corporatism, even fascism — but what alternative is there to indicate the universal benefits of capital accumulation, capital structure, and capital calculation — all of which result from the private ownership of the means of production?

In fact, private ownership of the means of production (that is, of capital) was the technical definition of capitalism, even among the anticapitalists who coined the term! The idea of political privilege for capital owners was just an assumed consequence, a conflation of definition and theory.

The only advantage I see to accepting this linguistic conflation is to conciliate the heirs of the New Left, to tease out of them a more consistent individualism without tripping their anticommercial reflexes. But aside from what I consider its intellectual dishonesty, this strategy, it seems to me, does more than postpone anti-economic prejudices; it implicitly promotes them.

Faced with these same prejudices, many anti-anti-capitalists adopted the label of “free enterprise,” but that term, taken literally, tells us nothing more than “free market” does. It certainly indicates nothing about the structure of ownership or of the means of production.

Until a free-market anticapitalist can offer me a useful alternative label for the utilitarian economic concept Mises called “capitalism,” I’ll stick with his reclaimed word.


13 Responses to 'capitalism' is a reclaimed word

  1. FSK says:

    I define “capitalism” as an economic system that includes an income tax, a central bank, and extensive government regulation of business. Those three things prevent a real free market from existing.

  2. bkmarcus says:

    FSK, you and I clearly agree on taxation, central banking, regulation, and the ideal of a real free market. I suspect we agree on plenty more. But you haven’t said why you define the term ‘capitalism’ the way you do; neither have you offered any alternative terminology to maintain the distinction I think we’d both agree it’s so important to maintain. Rigorous semantics should promote critical distinctions. Definitions that obscure those distinctions are bad definitions.

  3. FSK says:

    The present economic system is “capitalism”, so I define capitalism that way.

    I’ll define a “free market” as a market where nobody has a monopoly on anything. For example, the State has a monopoly on police protection. Therefore, the current system is not a free market.

    The important point is that “capitalism” DOES NOT EQUAL “free market”.

  4. Scott Lahti says:

    I suppose a thread on capitalism is as good a place as any to ask:

    Peabody: What was Norman Vincent Peale’s favorite work of Austrian-school economics?

    Sherman: I don’t know, Mr. Peabody…

    Peabody: Why, Bohm-Bawerk’s *Positive* Theory of Capital, of course…

  5. Ian Stewart says:

    I think the important distinction is not one of terminology, but of ideals. In my opinion, the capitalist thinkers would generally be fine with a more centralized capital structure. Certainly, the use of examples like Wal-Mart and private banks indicate no particular preference for how centralized an institution is, so long as it arose from a market of some sort. Mutualists/agorists/what-have-you are more concerned with decentralizing as much as possible; they’d be more likely to advocate credit unions and retail co-ops like REI.

    So my hurried late-night opinion of the matter is this: Capitalist thinkers don’t really care who holds capital, so long as they got it fairly; while anti-capitalist thinkers are concerned with creating institutions that give as many people as possible direct access to capital. They want to make owners out of everybody.

    And tangentially, I think conciliating with the New Left is quite a laudable goal. There are a whole lot of enthusiastic Obama supporters right now who will end up sorely disappointed…

  6. Deus X. Nihilo says:

    I suspect that the free market anti-capitalists would not have any problem with the term “capitalism” if so many who say they advocate free market capitalism didn’t frequently treat many of the consequences of the currently existing system of mercantilism and corporatism as though they were the consequences of a free market.

    It’s my understanding that THAT is the reason for distancing themselves from the term “capitalism,” not “to conciliate the heirs of the New Left, to tease out of them a more consistent individualism without tripping their anticommercial reflexes.”

    And I rather see their point.

    I’d wager that when self-described capitalists stop doing that, then the free market anti-capitalists would not have any problem using the “reclaimed” term themselves.

  7. capitalist says:

    FSK, what you’re defining is ‘socialism’, not ‘capitalism’.

  8. FSK says:

    “Capitalism” and communism/socialism *ARE THE SAME*. Read the Communist Manifesto.


    I consider “capitalism” and “free market” to *NOT* be synonyms.

  9. Deus X. Nihilo says:

    I think that what FSK is driving at is that if you’re really in favor of the free market ethos, then you should be opposed to “capitalism”–as it actually exists at this time, which is most definitely NOT based on free markets, but state-granted and state-enforced privilege.

    Many genuinely pro-free market libertarians promote an ideal form of capitalism that does not actually exist in reality. When they get into promoting their idealized form of capitalism by way of correctly opposing newly proposed state-socialist measures, they often make the mistake of conflating the features and consequences of the currently existing state-capitalist system with a free market, thus unintentionally defending the current anti-free market status quo.

    This, I think, has resulted in some considerable confusion.

  10. Jeremy says:

    Well, I guess if Mises defined capitalism in a particular way, that *must* be the definition that everybody uses. Personally, I don’t like the emphasis on “capital”. I don’t think it’s the centerpiece of the libertarian economy I want to see – if anything, massive, unprivileged decentralism, with an emphasis on the primacy of labor, is my preference (i.e. mutualism).

    I’d say capitalism as a word used to communicate with people to whom we should be reaching out is inextricably tied to patterns of capital structure, accumulation, and calculation that presuppose state intervention. It’s a great luxury that you, I, and the rest of your readers can debate these terms. It’s not a luxury we have when reaching out to form coalitions to crush privilege.

    Perhaps the term needs a qualifier, given that it is simply too squishy and comes with so much baggage (talk to the socialists once in a while). Carson and Chomsky both use the term “state capitalism” to denote the current system of privilege.

    If we’re going to reclaim a term, I’d rather reclaim socialism, personally – the idea that ownership of capital is intimately tied to the scale of capital involved. Often this is defined as state or collective ownership of the means of production. But only if you think the state is the best realization of the collective (anarchists don’t) and you assume capital must be aggregated to levels that don’t naturally conform to usufruct standards (mutualists, for example, don’t) and you have a preconceived notion of what constitutes advancement and progress that presupposes centralization (for God’s sake, nothing pisses me off about anarcho-capitalists more than this – who is going to respect the corporate identity without state compulsion and regimentation?).

    I’m not the most sophisticated economics student, but that would be my personal answer. That is all to say, there are very real reasons we reject capitalism, mostly dealing with the fact that we consider Mises’s opinion to be just another one among many.

  11. Jeremy says:

    But aside from what I consider its intellectual dishonesty, this strategy, it seems to me, does more than postpone anti-economic prejudices; it implicitly promotes them.

    I’m intellectually dishonest because I disagree with Murphy’s and Mises’s definitions and characterizations of capitalism? If only I had attended Mises University! ;-)

    When I see Austrians doing serious work on the viability of the corporate form sans state privilege, and when they start using capitalism to denote an economy that doesn’t privilege certain structures of capital aggregation (limited liability, anyone?), I’ll reconsider. But I followed the Kinsella / Quasibill debate, and I think the pro-corporate argument is extremely weak. Until it is strengthened, the corporatist leanings of capitalists are more than enough to turn me off to the term.

  12. Anders Mikkelsen says:

    The dictionary does define capitalism as the private or corporate ownership of the means of production. Sounds free market unless you think corporate ownership isn’t free market. It seems to me that there must be ways for people to freely agree to corporations without oppressing others.

    Capitalism is often defined in the popular mind as – accumulation of wealth by any means necessary. This is because this definition describes the reality of living in countries that ‘have a capitalist system.’ It is easy to see why this is objectionable.

    The definition of capitalism means that it is important to point out non-capitalist activities masquerading as part of our great capitalist system.

    I personally like the term Free Enterprise. I think it is clearly anti-state and implies that I can do what I want with my life and my property, including cooperating with others and giving to charity. It implies capitalism properly defined.

  13. Pingback: Moving toward a Free Market but Never Getting There - The Texan

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